Six ways to plan your capital more effectively

What are some of challenges faced by Commercial Real Estate professionals when doing capital planning for their organization.

November 15, 2016

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Peter Trollope

M aximizing the return on your company’s capital is one of the toughest tasks most corporate real estate (CRE) professionals face. Companies look to maximize their return on capital, more so in times of economic uncertainty and it can be challenging as a CRE professional to demonstrate to the C-suite why an objective, ROI-based prioritization of capital is important.

So how do you know if you are undertaking the right capital planning projects? What tools exist that help you understand the capital at your disposal? How can you ensure you are prioritizing projects that best meet the demands of the business, and reflect the priorities of your CFO? At JLL, answering these questions is what we call ‘taming the capital monster’.

I routinely hear from CRE professionals that grapple with the challenges and opportunities that capital planning presents. I’m interested in the C-suite perspective—what are their drivers, what are their concerns, how best can we help? Here we present what our clients have highlighted as their challenges in capital planning and some suggestions on “taming that capital monster”.

Be flexible. Balancing long-term global strategy with short-term execution is an ongoing challenge given the number of capital requests made each financial year. A capital plan must be fluid and flexible so resources can be redirected as project priorities change or when an unexpected situation or crisis occurs.

Know your business. Centralizing decisions and empowering your capital planning team is critical to plan success. The team must have visibility of the business strategy, pipeline, priorities and business drivers to be effective, and be given access to the people and data required to make sound recommendations.

Understand your CFO’s priorities. Balancing budget with delivery; project prioritization with time investment, is certainly a challenge for any capital planning team. Understanding your CFO’s and company’s priorities will certainly provide some clarity for your plan.

Base your decisions on reliable data. Decisions, based on quality data obtained through a robust system of collection and analysis, takes the emotion and guesswork out of the capital planning decision-making process. Know what data you need and what the analysis is telling you—it will give you confidence that the decisions you’ve made are right, and best for the company.

Embrace technology. Take advantage of the capital planning tools and technologies available to you—they will help structure your decision-making process around governance, communications, data collection and risk management.

Engage an advisor. CRE service providers can help relieve the stress of capital planning by sharing best-practice knowledge and experiences and help you focus where you need to. Consultancy services should assist in planning and capital estimation, achieving economies of scale and sound procurement plans.

Apply the right rigor around your real estate capital plan and it will pay dividends.